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Stimulus plan passed

As President Obama prepared to sign the $787 billion stimulus bill Tuesday debates still raged over the allocation of the funds.

The bill received votes from three Republican Senators and no support from House Republicans, but still passed through the Democratic majority in both chambers of Congress.

According to the BBC, the stimulus package is roughly 36 percent tax cuts and 64 percent spending on federal programs, aiming to please both fiscal conservatives and liberals.

Some of these tax cuts affect students and their parents, such as a rebate for up to $2,500 for full time students.

Still, the bill has encountered opposition from Republicans in both the House and the Senate.

UH Department of Economics chair David Papell explained why conservatives opposed the measure.

‘Republicans were opposed to the overall stimulus package because it contains spending,’ Papell said. ‘They’re convinced that spending, particularly on some of these programs, may take years to put the money into the economy and will not have the stimulus impact today of creating jobs.

‘Their philosophy has always been that the tax cuts, giving people immediate tax rebates, that’s money in their pocket they can go out and spend. So the McCain version of the bill was all tax cuts.’

Despite this, Papell said he thinks governmental spending is the most effective method for jolting the economy.

‘The best thing about the stimulus bill is that it’s tilted much more toward spending than tax cuts. We know there will be a fairly quick effect on the economy,’ Papell said.

‘The tax cuts are much more uncertain. If people think these tax cuts are permanent then they will have a big effect on spending. If people think these tax cuts are short term then that will have very little effect on spending. Last year we cut taxes, but only for one year, and it had no discernible effect on spending.’

Political science lecturer Van Wigginton said the reason Republicans refused to sign the bill was not only ideological but was also a measure to secure re-election.

This always occurs no matter which party is in the minority, he said.

‘Politically (Republicans) all want to see the stimulus package fail because in two years when they’re up for re-election, or four years in the presidential election, they can say, ‘Look at the failed policies,” Wigginton said. ‘We don’t look at what the other party did to stop the plan when we evaluate the president four years later. We just say, ‘Oh, it didn’t work.”

Still, when faced with lessons learned from other countries that have found themselves in similar situations, Papell said the U.S. has done a good job by acting quickly.

‘I’m pretty optimistic in the sense that we don’t seem to be making the same mistakes that Japan did,’ Papell said.

‘We learned that if you have a recession and low inflation you need to do something to stimulate the economy quickly to avoid the possibility of deflation,’ Papell said. ‘Japan did not do that. When Japan’s bubble burst they did not run stimulative fiscal policy. They waited too long.’

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